The Mesh - Lisa Gansky [29]
Businesses already experience negative financial consequences from creating waste and pollution, as well as damage to their brands. Ceres, one of the monitors that posts the environmental balance sheet of publicly traded companies, exposes the buried liabilities that currently look like assets on the balance sheets of many industrial companies. It identifies five types of business risk related to climate change: regulatory, physical, reputational, competitive, and litigious.
• Regulatory risk—California and ten northeastern states already have enacted laws requiring emissions reductions. That trend is spreading quickly in the United States and the rest of the world.
• Physical risk comes from impacts such as extreme weather events.
• Reputational risk shows up in the way consumers research and make purchasing decisions based on “green” criteria. An increasing number of Web sites, such as GoodGuide, offer information on corporate behavior relative to climate change and other environmental and social criteria.
• Competitive risks are indicated by the growth of climate-friendly industries relative to those that aren’t. For example, less than a quarter of American passenger cars and light-duty trucks meet emission standards in China, the fastest growing auto market in the world.
• Litigious risk is also expanding for polluting companies. Eight state attorneys are among the plaintiffs in a lawsuit against the five largest utilities for damages related to corporate contributions to climate change. The potential liability, the Ceres report says, is “immense.”
The Deepwater Horizon catastrophe in the Gulf of Mexico offers an appalling example of how this liability puts all of us at extreme risk, not just the company involved. The oil company will pay untold billions in cleanup costs, and in settlements of public and private lawsuits. Their manipulation of regulations and regulators, misleading public reports, and suppression of scientific evidence will become the subject of media reports and government investigations for years to come. But the rest of us—especially the people and beings whose lives depended on that ecosystem’s health—will pay most of the immense cost of the destruction to the region’s flora and fauna and ocean and riparian ecosystems.
Companies like BP that make bad environmental choices about how their products are produced, distributed, used, and disposed of will gradually suffer increasingly negative financial consequences. The company’s insurance costs, earnings per share, the subsequent profit paid to shareholders, and ultimately the brand equity will decline. (BP’s much heralded “Beyond Petroleum” branding is a dead letter: Who will now trust them as an environmentally responsible company?) A bad record also affects investors’ decisions. Two thirds of American investors report that they consider the ethics of a company before investing.
Then there’s the consumer side. People are becoming increasingly conscious about where their food comes from, how they move around, and what products and brands they buy. And there are more ways to find out, including mobile apps such as Seafood Watch and GoodGuide, which allow you to evaluate a product’s environmental record by scanning the UPC code. An MIT Web site called Sourcemap permits users to find out where products come from and what they are made of. This kind of information is guiding purchasing decisions. A 2008 study by Mintel, a leading market research company, reported that 36 percent of American adults claim to “regularly” buy green products—three times the number recorded sixteen months earlier. The number of people who “never” purchase green products had been cut in half.
As transparency about real costs—specifically, the cost of generating and managing waste—increases, environmentally responsible companies are more likely to be high performers financially. Some large corporations are already reaping the benefits of reducing greenhouse gas emissions. Walmart reports it will save an estimated $35-50 million for every one-mile-per-gallon